Daily Archives: March 4, 2012
THE threat of an Israeli attack on Iran’s nuclear facilities has pushed world oil prices up by 15 per cent in the past month and raised fears that the fissile geopolitics of the Middle East might once again spell global economic havoc.
Israel believes Iran’s nuclear program is approaching a point of no return beyond which it would be impossible to prevent it developing nuclear weapons.
Facing an election in November and enjoying the first rays of economic sunshine since the 2008 global financial crisis, Obama does not need a Middle East war and soaring oil prices.
However, there is a strong push in Israel for military action.
“If we do not stop Iran now, later on it will be impossible,” Deputy Foreign Minister Danny Ayalon says.
Israel, which is understood to have its own nuclear weapons, sees a nuclear-armed Iran as an existential threat.
Saudi Arabia has indicated it would seek nuclear capability if Iran achieved it, adding further uncertainty to the stability of the world’s richest oil region.
The next three months are the most likely time for an attack as Iranian skies are clearest during the northern spring.
Iran has declared it will close the Strait of Hormuz as a first point of retaliation for any Israeli raid.
The strait is the seaway through which the oil of Saudi Arabia, Iraq, Kuwait, Iran and the United Arab Emirates is shipped.
Giant oil tankers carrying 18 million barrels of oil every day travel down the 10km-wide outbound shipping channel. This represents a quarter of the world’s oil supply and 40 per cent of seaborne oil trade.
If Iran could block the strait, it would represent a greater disruption to the world’s supplies than those that followed the 1973 oil embargo after the Yom Kippur war, the 1978 Iranian revolution, the 1980 Iraq-Iran conflict or the 1990 Iraqi invasion of Kuwait.
The International Monetary Fund has warned that the world is ill-prepared for a new oil crisis. In a paper prepared for last weekend’s G20 finance ministers’ meeting in Mexico and released on Friday, the IMF said developed countries had run down their emergency stocks while spare capacity in the OPEC countries was no more than average.
“A halt of Iran’s exports to OECD economies without offset from other sources could trigger an initial oil price increase of around 20-30 per cent,” the fund said. “A sustained blockade of the Strait of Hormuz would lead to a much stronger and unprecedented disruption of global oil supply.”
The Australian government is expressing confidence that a crisis could be managed; however, the scale of the turmoil that would flow from a Hormuz Strait closure would far exceed the government’s contingency planning.
The shock from soaring oil prices would also undermine the emerging hopes for a global economic recovery, damaging consumer and business confidence and depressing the terms of trade for oil-importing nations.
Resources Minister Martin Ferguson told The Australian that any reduction of oil throughput in the Strait of Hormuz would inevitably affect global supply.
“The possible impact on Australia will depend on a range of factors, including the length of disruption.”
He said the national energy security assessment completed last year had established that the security of Australia’s supplies of liquid fuels was “robust, with resilience enabling the market to adjust to meet demand in the event of temporary global shocks”.
However, the Australian government is as politically exposed to a new oil crisis as is the Obama administration. Already, the rising oil price is feeding the Coalition’s argument that Australia can ill afford to be introducing carbon taxes.
It will put increasing pressure on the cost of living.
If rising prices turn into a full-blown oil crisis over the next few months, the case for abandoning the introduction of the July 1 start-up for the carbon tax would become overwhelming.
Australia is far more vulnerable to an oil crisis than the level of direct imports from the Middle East would suggest.
Australia’s oil refineries, which still supply 70 per cent of domestic petroleum products, depend on the Middle East for barely 15 per cent of their crude oil supplies.
Domestic oil wells, mostly in Bass Strait, supply 20 per cent, while the balance comes from more than 20 nations including Malaysia, Indonesia, Papua New Guinea, Nigeria and New Zealand.
However, Australia also imports 30 per cent of its refined petroleum products, mostly from Singapore, which depends on the Middle East for more than 80 per cent of its supplies.
The Australian government conducted a review of its energy security late last year. The consulting firm ACIL Tasman modelled a supply disruption in which Singapore’s refineries were out of action for 30 days, depriving the region of 1.4 million barrels a day of production.
This would be similar to the effects of Hurricanes Katrina and Rita, which knocked out Gulf of Mexico oil production and US oil refining in 2005.
One of the study’s authors, Alan Smart, says the shortfall pushed up prices but this was sufficient to close the gap, with demand falling and new supplies becoming available.
“When the price spiked, the market responded very quickly with the gap filled within six days.”
The study concluded that the same could be expected were Australia to lose access to Singapore supplies, with spare capacity elsewhere in Asia quickly brought onstream.
The study found that although prices would rise by 18 per cent, there would be no interruption to economic activity in Australia.
Smart cautions, however, that a localised or regional supply problem such as a refinery shutdown, may be very different from the results of a war in the Middle East.
Singapore analyst with the oil research company Wood Mackenzie Sushant Gupta says that scenarios for a closure of the strait show a major impact on oil supplies throughout the Asian region.
“There is a high dependency on Middle East crude, not just in Singapore, with some economies taking more than 90 per cent of their crude from there.”
Gupta says the spare capacity in the Asian refining industry would be of no use to Australia if the refineries could not get access to crude supplies.
Moreover, countries throughout the region would be principally concerned to secure their own domestic supplies. Countries such as South Korea, which import petroleum but export refined products would divert more of their output to their own market.
Exports from countries such as Malaysia and Indonesia could also fall, at least as a short-term response.
Gupta says that in the event of shortages, Australia would suffer from being at the greatest distance from the regional refineries.
“All the Asian countries will be competing for the same barrels of produce from Singapore. The premium on the products will increase and the countries closest physically to Singapore will have the advantage due to freight.”
Gupta said there would be no additional supplies coming forward to meet shortfalls from Singapore, so it would be up to the market, with a spike in prices, to reduce demand.
So, although Australia currently draws the bulk of its supplies from non-Middle East supplies, the reality is that it is self-sufficient for only 20 per cent of supplies, and the market’s ability to supply the rest would be tested by an extended blockade in the Gulf.
An immediate response would be the drawdown of emergency supplies kept by all nations that are members of the International Energy Agency.
The IEA was established among oil importing countries in the wake of the 1973 OPEC oil embargo and requires all members to keep a minimum of 90 days’ supplies.
In Australia’s case, the reserves are held by the major oil companies as part of their normal commercial operations. The steady slide in Australia’s domestic oil supply has meant that Australia’s reserves are falling short of the requirement, currently standing at 88 days.
ACIL-Tasman warns that the shortfall is likely to increase over coming years; however, it is not enough to make a meaningful difference to Australia’s ability to withstand a crisis.
Ferguson retains sweeping powers under the Liquid Fuels Emergency Act to order the oil companies to give priority to essential fuel users in the event that the nation were confronted with physical fuel shortages.
It is not certain that Iran would succeed in an effort to block the strait, despite the total width of the waterway narrowing to 40km.
Many tankers were sunk during the Iran-Iraq war in the early 1980s; however, shipping technology has greatly advanced since then.
Although modern ships ostensibly make a much larger target, carrying as much as two million barrels of oil each, they are divided into sealed compartments with double-hulls and are much harder to stop or sink, even than warships.
US analysis finds that an attack on one of these vessels by three anti-ship cruise missiles would have only a 12 per cent chance of stopping it.
The same research project found Iran would have to sow a minefield with more than 1000 advanced mines, a task that would take several months, to disrupt shipping, and that would succeed in disabling only half a dozen ships.
The head of the US joint chiefs of staff, General Martin Dempsey, has said Iran would have the capacity to block the strait, but only for a short period.
“We’ve invested in capabilities to ensure that if that happens, we can defeat that.”
The US Fifth Fleet, stationed on the other side of the Persian Gulf in Bahrain, including more than 20 ships including aircraft carriers, could overwhelm the sort of “small suicide boat” attacks which the US believes Iran is planning and provides a credible support to tanker fleet.
American oil researcher Amy Myers Jaffe says it would be difficult for Iran to stop the flow of oil from the Arabian Gulf for long, if at all.
What is beyond doubt, however, is that the moment Israeli aircraft start bombing Iran, the oil price will jump. It has already risen from about $US105 a barrel to $US125 since the start of the year.
The impact on Australia has been diluted by the strength of our currency, which means wholesale petrol prices have risen by only 5.5 per cent this year, but further rises are in prospect.
An analysis by Barclays Capital suggests the oil price would rise to $US150 to $US200 a barrel in the event of an attack; however, estimates are imprecise.
As well as the loss of supply, there would be additional demand from buyers seeking precautionary stocks.
Westpac’s head of international economics, Huw McKay says the world economy remains vulnerable to oil price spikes and adds this was shown in the first half of last year when the Arab Spring pushed oil prices higher.
“That put a spanner in the works for the United States economy at a time when it had finished calendar 2010 with a bit of an upswing. When it ran into the high oil prices and then the Japanese tsunami, the US had a very underwhelming first half year.”
Mr McKay says the situation is similar, with consumers beginning to show a revival in demand. “What the US consumer doesn’t need is a fuel tax hitting them.”
The jump in petrol prices both damages consumer spending and causes an exodus from US motor vehicle industry.
Higher oil prices will also damage the economies of Asia. In several Asian economies, including India and Indonesia, government subsidies to petrol means that rising fuel prices results in a loss of control over the budget.
“Every single commitment I have made to the state of Israel and its security, I have kept,” he told The Atlantic magazine. “Why is it that despite me never failing to support Israel on every single problem that they’ve had over the last three years, that there are still questions about that?”
The question deserves an honest answer, though the truth is not likely to cut through the fog of presidential self-pity. A man who compares himself to Lincoln, Gandhi, King, Mandela and FDR isn’t the sort to welcome disagreement.
And that is the heart of his problem. Obama is certain he knows what’s good for Israel. Given his record and the Iranian threat, it’s an impossible sell.
He came into office thinking Israel was the obstacle to Middle East peace; three years later, his policies are producing more signs of war than peace. The Palestinians won’t negotiate for their own state because the president foolishly urged them to make a ban on Israeli settlements a precondition.
He was wrong from the git-go, and still is. But facts don’t stand a chance. As a Democrat who speaks to Obama about the Mideast told me, he has a “stubborn worldview.”
How stubborn will be revealed today and tomorrow during crucial meetings with Israeli leaders. The Iranian march to nukes will top the agenda, but Obama’s view on Iran is typical of how he sees the region and his role in it.
Stripped of nuance, the gist is that Israel and America are oppressors and Muslims are oppressed. He remains obsessed with the idea that all will be well if only we prove to Muslims that we’re not bigots.
The latest example is his apology to Afghans after our soldiers mistakenly burned the Koran. Six soldiers have been murdered in subsequent riots, yet he insists those involved in the burning face military charges.
His approach to Iran is similarly misguided. Despite its thugocracy, he refuses to accept that his policy of engagement has failed. The White House even says it sees Iran as a “rational actor,” and Obama told The Atlantic that military action against Iran could work to its advantage.
“At a time when there is not a lot of sympathy for Iran and its only real ally [Syria] is on the ropes, do we want a distraction in which suddenly Iran can portray itself as a victim?” he asked.
This is Obama at his faculty-lounge worst. Trapped by his own prejudices and misreading of history and culture, he continues to suggest that Iran is open to persuasion if he can find the right words. It’s not. It’s an evil regime that tortures its people, kills American soldiers, sponsors terrorism and wants a nuclear bomb to use against Israel and to dominate Arab countries.
A friend who recently met with top Israeli officials says the bottom line they will explain to Obama is that there are two things no Israeli government can ever do. First, it cannot allow a mortal enemy to get a weapon of mass destruction or the ability to make one. Second, it cannot entrust its survival to a third party, including the United States.
The policy that flows from those principles is obvious. Israel will attack when it feels Iran is close to getting the bomb. And Israel is more likely to reach that conclusion sooner because it doesn’t trust Obama’s resolve or time line.
For his part, Obama will have to search someplace else for respect. Israel is too busy trying to survive.
- Obama says not bluffing on Iran military option (mb50.wordpress.com)
At Monday’s meeting between Benjamin Netanyahu and Barack Obama the Israeli prime minister will deliver a stark warning, reports Adrian Blomfield in Jerusalem
By Adrian Blomfield, in Jerusalem
8:31PM GMT 03 Mar 2012
Their relationship, almost from the outset, has been frostier than not, a mutual antipathy palpable in many of their previous encounters.
Two years ago, Barack Obama reportedly left Benjamin Netanyahu to kick his heels in a White House anteroom, a snub delivered to show the president’s irritation over Israel’s settlement policy in the West Bank. In May, the Israeli prime minister struck back, publicly scolding his purse-lipped host for the borders he proposed of a future Palestinian state.
When the two men meet in Washington on Monday, Mr Obama will find his guest once more at his most combative. But this time, perhaps as never before, it is the Israeli who has the upper hand.
Exuding confidence, Mr Netanyahu effectively brings with him an ultimatum, demanding that unless the president makes a firm pledge to use US military force to prevent Iran acquiring a nuclear bomb, Israel may well take matters into its own hands within months.
The threat is not an idle one. According to sources close to the Israeli security establishment, military planners have concluded that never before has the timing for a unilateral military strike against Iran’s nuclear facilities been so auspicious.
- Obama sends top security aide to Israel
18 Feb 2012
- Is Israel gearing up for an attack on Iran?
17 Feb 2012
It is an assessment based on the unforeseen consequences of the Arab Spring, particularly in Syria, which has had the result of significantly weakening Iran’s clout in the region.
Israel has always known that there would be an enormous cost in launching an attack on Iran, with the Islamist state able to retaliate through its proxy militant groups Hamas and Hizbollah, based in Gaza and Lebanon respectively, and its ally Syria.
Each is capable of launching massive rocket strikes at Israel’s cities, a price that some senior intelligence and military officials said was too much to bear.
But with Syria preoccupied by a near civil war and Hamas in recent weeks choosing to leave Iran’s orbit and realign itself with Egypt, Iran’s options suddenly look considerably more limited, boosting the case for war.
“Iran’s deterrent has been significantly defanged,” a source close to Israel’s defense chiefs said. “As a result some of those opposed to military action have changed their minds. They sense a golden opportunity to strike Iran at a significantly reduced cost.” Not that there would be no cost at all. With the rise of the Muslim Brotherhood in Egypt, Hamas has chosen to throw its lot in with its closest ideological ally and forsake Iran and its funding, but it could still be forced to make a token show of force if smaller groups in Gaza that are still backed by Tehran unleash their own rockets.
Likewise, Bashar al-Assad, the Syrian president, could seek to reunite his fractured country with military action against Israel.
Iran would almost certainly launch its long-range ballistic missiles at Israel, while Hizbollah, with an estimated arsenal of 50,000 rockets, would see an opportunity to repair its image in the Middle East, battered as a result of its decision to side with Mr Assad.
Even so, it is not the “doomsday scenario” that some feared, and a growing number in the security establishment are willing to take on the risk if it means preventing the rise of a nuclear power that has spoken repeatedly of Israel’s destruction.
“It won’t be easy,” said a former senior official in Israel’s defense ministry. “Rockets will be fired at cities, including Tel Aviv, but at the same time the doomsday scenario that some have talked of is unlikely to happen. I don’t think we will have all out war.” In itself, the loss of two of Iran’s deterrent assets would probably not be enough to prompt Israel to launch unilateral military action.
The real urgency comes from the fact that Israeli intelligence has concluded that it has only between six and nine months before Iran’s nuclear facilities are immune from a unilateral military strike.
After that, Iran enters what officials here call a “zone of immunity”, the point at which Israel would no longer be able, by itself, to prevent Tehran from becoming a nuclear power.
By then, Israel assesses, Iran will have acquired sufficient technological expertise to build a nuclear weapon. More importantly, it will be able to do so at its Fordow enrichment plant, buried so deep within a mountain that it is almost certainly beyond the range of Israel’s US-provided GBU-28 and GBU-27 “bunker busting” bombs.
It is with this deadline in mind that Mr Netanyahu comes to Washington. Mr Obama’s administration has little doubt that their visitor’s intent is serious. Leon Panetta, the US defence secretary, stated last month that there was a “strong likelihood” of Israel launching an attack between April and June this year.
Senior US officials have, unusually, warned in public that such a step would be unwise and premature, a sentiment echoed by William Hague, the Foreign Secretary.
Mr Obama is determined that beefed up US and EU sanctions targeting Iran’s central bank and energy sector be given the chance to work and is desperate to dissuade Israel from upsetting his strategy.
But to give sanctions a chance, Mr Netanyahu would effectively have to give up Israel’s ability to strike Iran and leave the country’s fate in the hands of the United States – which is why he is demanding a clear sign of commitment from the American president.
“This is the dilemma facing Israel,” the former senior military officer said. “If Iran enters a zone of immunity from Israeli attack can Israel rely on the United States to prevent Iran going nuclear?”
Mr Netanyahu’s chief demand will be that Washington recognizes Israel’s “red lines”. This would involve the Barack administration shifting from a position of threatening military action if Iran acquired a nuclear weapon to one of warning of the use of force if Tehran acquired the capability of being able to build one.
Mr Obama will be reluctant to make such a commitment in public, though he might do so in private by pledging action if Iran were to expel UN weapons inspectors or begin enriching uranium towards the levels needed to build a bomb, according to Matthew Kroenig, a special adviser to the Pentagon on Iran until last year.
“Israel is facing the situation of either taking military action now or trusting the US to take action down the road,” Mr Kroenig, an advocate of US military strikes against Iran, said. “What Netanyahu wants to get out of the meeting are clear assurances that the US will take military action if necessary.” The American president may regard Mr Netanyahu as an ally who has done more to undermine his Middle East policy of trying to project soft power in the Arab world than may of his foes in the region.
But, on this occasion at least, he will have to suppress his irritation.
Mr Netanyahu is well aware that his host is vulnerable to charges from both Congress and his Republican challengers for the presidency that he is weak on Iran, and will seek to exploit this as much as possible.
Tellingly, Palestinian issues, the principal source of contention between the two, will be sidelined and Mr Obama has already been forced to step up his rhetoric on Iran beyond a degree with which he is probably comfortable.
Last week, in a notable hardening of tone, he declared his seriousness about using military force to prevent Iran acquiring a nuclear weapon, saying: “I do not bluff.” Yet whatever commitments he might give to Mr Netanyahu it is far from clear that it will be enough to dissuade Israel from taking unilateral action.
Among the Israeli public, there is a sense of growing sense that a confrontation with Iran is inevitable. Overheard conversations in bars and restaurants frequently turn to the subject, with a growing popular paranoia fed by the escalation in bomb shelter construction, air raid siren testing and exercises simulating civilian preparedness for rocket strikes.
Last week, Israeli newspapers fretted that the government was running short of gas masks, even though more than four million have already been doled out.
But while the growing drumbeat of war is unmistakable, it is unclear whether or not Mr Netanyahu, for all his bellicose rhetoric, has yet fully committed himself to the cause.
Ostensibly, a decision for war has to be approved by Mr Netanyahu’s inner cabinet. But everyone in Israel agrees that the decision ultimately rests with Ehud Barak, the defense minister who is unabashedly in favor of military action, and, most importantly, the prime minister.
“Netanyahu is a much more ambiguous and complex character,” said Jonathan Spyer, a prominent Israeli political analyst. “We know where Barak stands but with Netanyahu it is less clear.
“Netanyahu is not a man who likes military adventures. His two terms as prime minister have been among the quietest in recent Israeli history. Behind the Churchillian character he likes to project is a very much more cautious and vacillating figure.”
Were Mr Netanyahu to overcome his indecisiveness, as many observers suspect he will, real questions remain about how effective an Israeli unilateral strike would be.
With its US-supplied bunker busters, Israel’s fleet of F-15i and F-16i fighter jets, and its recently improved in-air refueling capabilities, Israel could probably cause significant damage to the bulk of Iran’s nuclear facilities, including the Natanz enrichment plant.
But the second enrichment plant at Fordow, buried beneath more than 200 feet of reinforced concrete, could prove a challenge too far.
“Natanz yes, but I don’t think they could take out Fordow,” said Mark Fitzpatrick, an Iran expert at the International Institute of Strategic Studies in London. “They could take out the entrance ramps but not the facility itself.”
With its Massive Ordnance Penetrator bunker busters, each weighing almost 14 tonnes, the United States stands a much better chance of striking Fordow successfully, thus disrupting Iran’s nuclear programme for far longer than the one to three years delay an Israeli attack is estimated to cause.
But whether Israeli is prepared to leave its fate in American hands is another matter.
“Israelis are psychologically such that they prefer to rely on themselves and not on others, given their history,” the Israeli former senior defense ministry official said. “We feel we have relied on others in the past, and they have failed us.”
- Obama says not bluffing on Iran military option (mb50.wordpress.com)
- Israel’s US supporters flock to hear Barack Obama on Iran fears – Times of India (timesofindia.indiatimes.com)
- Obama warns both Iran and Israel, ‘I don’t bluff’ (therearenosunglasses.wordpress.com)
- Iran Now Top US-Israel Issue (myfoxphoenix.com)
- Israel’s Backers Pressure Obama To Combat Iran (mysanantonio.com)